Nebraska Seen as Outstanding Business State

In a single generation the Fortune 500's center of gravity has utterly shifted. So which states have the advantage today? Here, a geography of wins and losses.

Shawn Tully

In a single generation the Fortune 500’s center of gravity has utterly shifted. So which states have the advantage today? Here, a geography of wins and losses.Call it our Diamond Anniversary. This year’s Fortune 500 marks the 60th running of the list that debuted in 1955, amid the prosperity of the Eisenhower years. And America’s 500 largest companies, ranked by revenues recorded for their 2013 fiscal years, merit a toast for performing mightily in a struggling economy. The most significant milestone is downright stunning — both in scope and surprise: In fiscal 2013 the 500 “topped the T” for the first time, posting profits of $1.08 trillion, an all-time record. The figure dwarfs the previous high-water mark of $824.5 billion in fiscal 2011, which had smashed the one before that ($785 billion), set in 2006. Profit records are cheap, it seems, in the 500.

Unfortunately, the bonanza isn’t translating into a strong revival in jobs. While profits in the 500 grew 31.7% last year, the group added just 180,000 employees, a meager gain of 0.7%. The earnings story is still one mainly about squeezing more cars, semiconductors, and grocery sales from a barely rising workforce. Wal-Mart, the nation’s revenue leader (with $476.3 billion in 2013) and the largest employer, kept its headcount steady at 2.2 million employees.

The retail chain’s stature in the 500 also highlights the significance of a second, if less obvious, anniversary. This is the 20th running of the list since service companies were included in 1995; prior to that, the 500 was the province of U.S. industrial giants. That change reflects a decisive reshaping of American business. When service companies were added in 1995, their share of total Fortune 500 revenue was already prodigious, at 50.4%. This year’s group accounts for a heady 60.5% of total revenue.

Among the biggest service companies not even on the 1995 roster are Amazon.com (2014 ranking: No. 35), Comcast (No. 44), Google (No. 46), and DirecTV (No. 98). The health care revolution likewise elevated a host of new leaders. The five health care providers and retailers that now reside in the top 25 were either far down the list in 1995 — CVS Caremark (No. 12 today, was ranked No. 93 two decades ago), UnitedHealth Group (went from 303 to 14), McKesson (78 to 15), and Cardinal Health (203 to 22) — or didn’t make it at all: Witness Express Scripts (No. 20).

Graphic by Nicolas Rapp with research by Scott DeCarlo. Click to enlarge.

Yet of all the generational changes in the 500, the shift in geography may well be the most dramatic. The red and yellow circles on the graphic — which show gains in the market cap of Fortune 500 companies in each state over the past two decades — convey some of the story of the big-company sweepstakes. That broad narrative of winners and losers, indeed, remains largely the same whether one tells it in terms of the number of major companies, total sales, or employees.

Overall, nine states — California, Texas, Minnesota, North Carolina, Tennessee, Washington, Arkansas, Wisconsin, and Nebraska — have truly shined since 1995. Seven others — New York (despite tying California for the most number of companies in the 500), New Jersey, Connecticut, Pennsylvania, Ohio, Illinois, and Michigan — have disappointed. The collective market capitalization of companies in the nine leading states has grown an average 12% a year since 1995, close to doubling the gain (6.6%) for those based in the laggards.

Over the past two decades the nine winning states have gained 40 company headquarters, while the seven strugglers have shed 42. Companies in the lucky nine now account for 44% of the 500’s total revenue, up from 26% two decades ago. For the not-so-lucky seven, it has been a rough reversal of fortune: a drop from 55% of total sales to 37%.

And, finally, jobs: The hot nine have added 5.5 million jobs in 20 years and now account for 40% of all employment, up from 26% in 1995. By contrast, the embattled, smokestack-heavy seven have dropped 645,000 employees, and their share of the 500 workforce has shrunk from well over half the total to 38%.